Highly qualified, highly complicated: HQS reform causes concern for companies

Companies in Russia have been using the procedure for hiring foreign highly qualified specialists (HQS) since 2010. The model has proven to be a useful tool for the Russian economy: Specialists with the necessary know-how come to Russia and increase the added value in the companies. In return, they receive a legal status with benefits. The amendments to the law on HQS legal status proposed by the Russian Ministry of Finance in mid-February essentially provide for an almost three-fold increase in the statutory minimum salary. HQS bar to be readjusted Specifically, the authority is proposing to raise the minimum monthly gross salary for HQS from the current 250,000 roubles, around 2700 euros, to 717,000 roubles, around 7800 euros. The professions of doctors, teachers and researchers are excluded - their minimum salary is to be set at 358,000 roubles, the equivalent of 4,000 euros. The current minimum salary of 250,000 roubles applies to all professions with the exception of highly qualified foreign medical staff (at least 83,000 roubles, the equivalent of 910 euros) and foreign specialists in Russian special economic zones (58,000 roubles, 640 euros). When the HQS model was introduced in 2010, the minimum salary was 167,000 roubles, equivalent to 4142 euros at the then exchange rate of 40.33 roubles per euro. "The authors of the employment concept saw the minimum salary of highly qualified specialists in relation to the average Russian wage and wanted to ensure that the bar was set many times higher and that the HQS status was also comprehensible," says Ruslan Kokarev, who was actively involved in the development as a member of the leadership of the Association of European Businesses (AEB) at the time and is now Managing Director of the German-Russian Chamber of Commerce Abroad. In view of inflation and the ongoing wage rally in Russia, the government raised the minimum HQS salary from 167,000, the equivalent of 1815 euros, to 250,000 rubles, approx. 2717 euros, for the first time in 2024. Last year, the nominal average salary in Russia was 100,000 roubles (1100 euros), five times higher than in 2010, when it amounted to 21,000 roubles, or 40.33 roubles per euro at the exchange rate at the time. Last year, the monthly salary of a delivery man in Moscow was 140,000 roubles (1,500 euros), while car couriers were paid as much as 200,000 roubles (2,200 euros). supporters of the new regulation argue that this development blurs the boundaries between unqualified and highly qualified work and makes it necessary to adjust the minimum salary of foreign specialists in line with the market. Against tricks by employers By increasing the HQS minimum wage, the Ministry of Finance also wants to close loopholes that employers use to hire unqualified foreigners. According to Major General Kirill Adsinov, head of the work permits and visas department at the Ministry of the Interior, the authorities are taking offense at the current "non-transparent" employment model for foreigners. It is a free, uncontrollable movement of workers that goes hand in hand with tax evasion, he criticizes. "We also hear from employers, especially large companies, that they are dissatisfied with the turnover of workers. Companies invest in recruiting and the hiring process, and the workforce then leaves and hires itself out via online platforms," explains Adsinov. Vladimir Grusdev, chairman of the Russian Bar Association, sees the authorities' approach as consistent logic: the state wants higher tax revenues - and is now also demanding more from foreigners. Budget funds should only benefit those who pay into the budget, explains the lawyer. Business associations take sides If the initiative is implemented, this would have noticeable consequences for numerous companies in Russia that rely on top foreign talent - including many member companies of the German-Russian Chamber of Commerce Abroad. According to experts, the planned measure will primarily affect skilled workers recruited by SMEs. Top foreign managers who work as CEOs or in company management are not affected. Their remuneration is generally above the targeted minimum gross salary of 717,000 roubles.Alexander Kalinin, President of the business association for small and medium-sized enterprises "Opora Rossiji", warns: "Raising the minimum salary to 700,000 will practically put an end to the HQS model." The head of the association adds that such salaries are only conceivable for the city center of Moscow, but are ruled out in the regions, for example in the Ivanovo region, and that the initiative is causing unrest in business circles. In a resolution prepared as part of the forum "Personnel of the Future: Interaction between Business and the State" in mid-February, Alexander Shokhin, President of the Russian Union of Entrepreneurs RSPP, warns: "A minimum salary of 717,000 roubles is a clear barrier. Such salaries are not widespread even among Russian workers. "The demographic situation and a significant departure of workers for various reasons are having an impact on the labor market and require the search for additional workers, including abroad, according to the resolution to the government drafted by RSPP.the Russian economy is increasingly reaching its personnel limits. According to estimates, the available labour force potential has decreased by around 1.5 million people since 2022 due to reduced immigration and fewer labour migrants from Central Asia as well as mobilization, casualties and the wounded. The unemployment rate was already low before 2022 and currently stands at 2.2%, with competition for labor between the military, defense industry and civilian sectors affecting economic growth. Companies report rising wages and increasing difficulties in filling qualified positions. The result is higher costs and limited expansion of production.  Chamber proposal: link increase to inflation The German-Russian Chamber of Commerce Abroad, together with other business associations active in Russia, is advocating an adjustment of the proposed HQS regulation. The chamber considers a multiple increase in the minimum salary of highly qualified specialists this year to be counterproductive - not only for the companies concerned, but also for the competitiveness of the Russian economy. Because the companies' financial plan for 2026 is already fixed and a revision will lead to additional financial and administrative costs, the measure will have a direct inflationary impact on the final price of the products and services of the companies concerned. To avoid such a burden, the German-Russian Chamber of Commerce Abroad proposes raising the HQS minimum salary not in relation to the average Russian salary, but to the accumulated inflation of recent years. Taking into account the inflation rate since 2010, the increase would then rise to 482,000 roubles, for example, the equivalent of 5300 euros. With regard to the inflation rate since 2024, the minimum limit would be 285,000 roubles, 3600 euros. The German-Russian Chamber of Commerce Abroad also proposes that the new regulation be introduced from January 1, 2027 at the earliest, which the Chamber believes will ensure a well-dosed transition to the new minimum salary requirements, reduce the risk of an HQS slump in the Russian economy and ensure stable tax revenues for the state. Ultimately, the increase strengthens the legal status of highly qualified specialists, who are better protected against infiltration by unqualified workers. HQS privilege In Russia, foreign specialists with a high level of qualification in a specific field are considered HQS. The assessment of HQS competence is the responsibility of the employer and does not have to be verified by the authorities. However, since 2023, the authorities in some Russian regions have required evidence of the qualifications of the respective immigrant, and the HQS procedure is accompanied by a number of benefits for foreign specialists. For example, the employer does not need a green light from the authorities to hire a highly qualified immigrant. Such specialists are also not subject to the annual employment quota for foreigners, and an HQS work permit is valid for three years. The foreign specialist receives a residence permit for this period. After two years, they are then entitled to a permanent settlement permit. In addition, the highly qualified foreigner may bring their immediate family members to Russia. In the event of dismissal, the highly qualified immigrant must find a new job within 30 days. The new employer will then take care of obtaining a new work permit. Employers also enjoy a number of advantages in the HQS procedure. For example, they only have to take out work accident insurance for their foreign specialists and do not have to pay into the statutory health insurance scheme, while foreign specialists are treated the same as Russian citizens when it comes to income tax. Until the 2025 tax reform, income tax was 13% and 15% (annual salary from 5 million roubles, approx. 55,400 euros). After the tax reform, a progressive five-tier tax scale applies throughout Russia. 13% income tax is paid by Russian citizens and HQS workers with an annual gross salary of up to 2.4 million roubles, 26,600 euros, i.e. a monthly salary of up to 200,000 roubles, equivalent to 2200 euros. As highly qualified specialists are often among the higher earners, their income tax is at least 15% (200,000-417,000 roubles a month, 2200-4600 euros), 18% (417,000-1.67 million roubles, 4600-18,300 euros), 20% (1.67-4.17 million, 18,300-45,800 euros) or 22% (over 4.17 million a month, 45,800 euros), depending on their salary level; How the HQS regulation came about After a decade of upheaval in the Yeltsin era, Russia, the largest country in the world, entered a phase of active growth in the early 2000s. Numerous foreign companies discovered the untapped potential of the Russian market. European companies in particular increasingly made direct investments in Russia, leading to the emergence of industrial companies in the Russian regions with the participation of international investors. It quickly became clear that this market opening must also be accompanied by the necessary know-how, and the idea of creating a simplified procedure for recruiting foreign specialists was initiated by Russian entrepreneurs in 2008. The Foreign Investment Advisory Council (FIAC), which advises the Russian government on foreign investment, and the Association of European Businesses (AEB) were at the cradle of this initiative.Ruslan Kokarev, then Chief Operating Officer at the AEB, was involved in the process and explains: "We didn't want to reinvent the wheel and relied on the experience of our European colleagues. The basis for the HQS law in Russia was the European 'Blue Card‘ for foreign highly qualified specialists, which was being actively discussed within the EU at the time. "Established in an EU directive in June 2009, the Blue Card only came into force in Germany in 2012. The Blue Card is the most important residence permit for skilled worker migration to Europe and is aimed at highly qualified third-country nationals with academic qualifications, graduates of tertiary education programs or IT specialists and managers without formal qualifications who are seeking a professional career in the EU. With the exception of Ireland and Denmark, the Blue Card is valid in all EU member states. The EU Blue Card also creates easier conditions for obtaining a settlement permit and for family reunification. A certain salary level is required for it to be issued. The minimum gross salary is currently 4225 euros per month. So-called shortage occupations are an exception; IT specialists, engineers, doctors, scientists, mathematicians and academic nursing staff are classified as such. Their minimum salary is 3827 gross per month  HQS and Blue Card in comparison The HQS model is used in particular by Russian subsidiaries of foreign companies to recruit specialists and managers. There is great demand for highly qualified specialists in the fields of IT, education, research and healthcare. Companies in particular need experienced engineers and technicians with the necessary know-how for technology and production processes. Since the introduction of the HQS regulation in 2010, the number of work permits for foreign highly qualified specialists has grown continuously. In 2011, it stood at 11,000, and in 2015 it exceeded the 40,000 mark for the first time. In the Covid year 2020, the number of work permits temporarily fell below 20,000 and reached 44,000 the following year. 2024 saw a level of 50,800 compared to 32,000 in the previous year. Last year, 75,400 work permits were issued to foreign specialists the highest figure to date.42,600 Blue Cards were issued in Germany in 2024, 14,850 of which were new arrivals. In 2023, there were 41,000 Blue Cards. The most important countries of origin among immigrants to Germany in 2024 were India (20%), Turkey (13%), Russia (10%), Iran (7%) and China (5%). In 2023, the proportion of highly qualified immigrants from Russia was as high as 19%.  Rising rates of foreigners Work permits that do not go through HQS are issued in Russia to nationals of countries that require visas, such as the European Union, China or India. Last year, a total of 240,000 such work permits were issued. In 2024, the total was 138,000. The maximum number of work permits is determined annually by quotas; these do not apply to foreign HQS. The level of the quota depends on the number of applications submitted by employers who cannot find employees domestically and are reliant on foreign workers. For 2026, the foreigner quota will be 270,000 - an increase of 12.5% compared to 2025. After 2022, the number of Chinese entering Russia for work purposes has multiplied. In 2022, there were 11,800 Chinese citizens, in 2024 already 98,300 and in the first three quarters of 2025 alone already 106,700. India is now in second place, with 2,800 people traveling to Russia for work purposes in 2022 and 27,200 people from January to September 2025. Turkey is in third place with 14,700 arrivals most recently. Vietnam, Bangladesh and Cuba are examples of other countries requiring visas from which more people have entered Russia for work purposes since 2022. In addition to work permits, the Russian migration authorities issue so-called work patents, which are intended for migrants from visa-free countries (Uzbekistan, Tajikistan, Azerbaijan). Such a patent is issued for one month to one year. Foreigners with a residence permit or settlement permit and citizens of the Eurasian Economic Union (Armenia, Kazakhstan, Kyrgyzstan, Belarus) are exempt from this. In 2024, Russian authorities issued 2.08 million labor patents - a decrease compared to the previous year, when 2.13 million patents were granted. If the number of work patents is added to the work permits of workers from countries requiring visas and HQS, the proportion of highly skilled workers in 2024 was around 2.2%. This article first appeared in the exclusive newsletter of the German-Russian Chamber of Commerce Abroad The post Highly qualified, highly complicated: HQS reform causes companies concern appeared first on ostwirtschaft.de.